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POLICY FRAMEWORK TO

PROMOTE FDI IN INDIA


 An investment made by a company or entity based in one
country, into a company or entity based in another country.
 Foreign direct investments differ substantially from indirect
investments such as portfolio flows, wherein overseas
institutions invest in equities listed on a nation's stock
exchange.
 Entities making direct investments typically have a significant
degree of influence and control over the company into which
the investment is made.
 Open economies with skilled workforces and good growth
prospects tend to attract larger amounts of foreign direct
investment than closed, highly regulated economies.
 The Government has put in place a policy framework on Foreign
Direct Investment. which is embodied in the Circular on Consolidated
FDI Policy, issued which is updated every six months, to capture and
keep pace with the regulatory changes. The Department of Industrial
Policy and Promotion (DIPP), Ministry of Commerce & Industry,
Government of India makes policy pronouncements on FDI through
Press Notes/ Press Releases which are notified by the Reserve Bank
of India as amendments to the Foreign Exchange Management.

 regulatory framework for FDI consists of Acts, Regulations, Press


Notes, Press Releases, Clarifications, etc.
FDI policy is reviewed on an ongoing basis and measures for its
further liberalization are taken. Change in sectoral policy/sectoral
equity cap is notified from time to time through Press Notes by the
Department of Industrial Policy & Promotion. Policy announcement by
DIPP are subsequently notified by RBI under FEMA.
Foreign Direct Investment (FDI) is permitted as
under the following forms of investments-

• Through financial collaborations.

• Through joint ventures and technical


collaborations.

• Through capital markets via Euro issues.

• Through private placements or


preferential allotments.
ENTRY STRATEGIES FOR
FOREIGN INVESTOR

• Foreign Company has the following options to


set up business operations in India :

By incorporating a company under the Companies Act,


1956
• A wholly owned subsidiary .
• Joint venture company - existing company or new company with
domestic partner.

As an unincorporated entity
• Liaison Office
• Project Office
• Branch Office
F D I - APPROVAL
Foreign direct investments in India are approved
through three routes:

• Automatic approval by RBI.

• The FIPB Route.

• CCFI Route
AUTOMATIC ROUTE FIPB ROUTE CCFI ROUTE
• No need of Prior Approval •FDI in activities not covered under the
From FIPB,RBI,GOI. automatic route require prior • Investment proposals falling
government approval. outside the automatic route.
• BUT • And
•Approvals of all such proposals
including composite proposals involving • Having a project cost of Rs.
• The investors are only
foreign investment/foreign technical 6,000 million or more would
collaboration is granted on the
required to notify the Regional recommendations of FIPB. require prior approval of
Office concerned of the •Application for all FDI cases, except Cabinet Committee of
Reserve Bank of India within NRI investments and 100% EOUs, Foreign Investment
should be submitted to the FIPB
30 days of receipt of inward Unit,DEA, Ministry of Finance. (“CCFI”).
remittances.
• AND •Application for NRI and 100% EOU • Decision of CCFI usually
cases should be presented to SIA in
Department of Industrial Policy and conveyed in 8-10 weeks.
• File the required documents Promotion (DIPP). Thereafter, filings have to
along with form FC-GPR with be made by the Indian
that Office within 30 days of •Application can be made in Form FC-
IL. Plain paper applications carrying all
company with the RBI.
issue of shares to the non- relevant details are also accepted.
resident investors.
•No fee is payable.
FDI IS NOT ALLOWED IN
FOLLOWING SECTORS

ARMS AND AMMUNATION

ATOMIC ENERGY

RAILWAY TRANSPORT

COAL AND LIGNITE

Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds,


copper, zinc.

LOTERY BUSINESS
AIRPORTS TELECOM DOMESTIC AIRLINES
• Foreign Investment up to • FDI in basic and cellular, • FDI up to 49% (40%)
100% is allowed in green unified access services, permitted under automatic
field projects under national/ international long route
automatic route distance , V-Sat, public
mobile radio trunk • Automatic Route is not
• Foreign Direct Investment services , global mobile available
is allowed in existing personal communications
services
projects • However, a foreign airlines
are not allowed to have
• - up to 74% under • - Automatic up to 49% any direct or indirect
automatic route • - FIPB beyond 49% but equity participation
up to 74%
• - beyond 74% and up to • 100% investment by
100% subject to • Manufacture of telecom NRIs/OCB’s
Government approval equipments - Automatic up
to 100%.
DRUGS & PHARMA INSURANCE
• FDI up to 100% is permitted under the • FDI up to 26% allowed on the
automatic route for manufacture of automatic route
drugs and pharmaceuticals (The
following is the current position)
• However, license from the
• FDI up to 74% in the case of bulk drugs, Insurance Regulatory &
their intermediates Pharmaceuticals and
formulations would be covered under Development Authority (IRDA)
automatic route. has to be obtained

• FDI above 74% for manufacture of bulk • There is a proposal to increase


drugs will be considered by the
Government on case to case basis this limit to 49%
MINING PETROLEUM
• Coal & Lignite mining for captive • Petroleum and natural gas sector,
consumption by power projects, and other than refining and including
for iron & steel and cement market study and formulation; setting
production - Automatic up to 100% up infrastructure for marketing -
Automatic up to 100%

• Mining covering exploration and • For petroleum refining activity 100%


mining of diamonds and precious FDI is permitted in Indian Private
stones, gold, silver and minerals - Companies under automatic route
Automatic up to 100% and up to 26% FDI is permitted in
Public Sector Undertakings with
Government approval
PRIVATESECTOR TRADING PRINT MEDIA
BANKING • Wholesale / cash & carry • FDI upto 100% in
trading - Automatic upto publishing/printing
• Foreign Investment 100% scientific & technical
up to 74% is magazines, periodicals &
permitted from all • Trading for exports - journals
sources under the Automatic upto 100%
automatic route • FDI upto 26% in
• Trading of items sourced publishing news papers
subject to and periodicals dealing in
from small scale sector -
guidelines for 100% with Government news and current affairs.
setting up of approval
branches/subsidiari • All investments are
es of foreign banks • Single Brand product subject to the guidelines
issued by the Ministry of
issued by RBI from retailing - 51% with
Information and
time to time. Government approval
Broadcasting
BROADCASTING INFRASTRUCTURE
FDI permitted for setting up hardware • 100% FDI is permitted for the
facilities such as up-linking, HUB, etc up
to 49% under Government approval route
following activities:

• Electricity Generation (except


FDI permitted in Cable Network up to 49% Atomic energy)
under Government approval route
• Electricity Transmission
• Electricity Distribution
Foreign Investment (FDI/FII) up to 49%
allowed under Government approval route • Mass Rapid Transport System
in Direct to Home Service Providers. FDI • Roads & Highways
limited to 20% • Toll Roads
• Vehicular Bridges
FDI permitted in FM radio up to 20% • Ports & Harbors
under Government approval route • Hotel & Tourism
SPECIAL
INVESTMENT
AVENUES
ELECTRONIC EXPORT ORIENTED SPECIAL ECONOMIC
UNITS ZONE
HARDWARE AND • Special Economic Zone
SOFTWARE • 100% foreign equity (“SEZ”) is deemed to be
TECHNOLOGY (is permitted foreign territory for the
purposes of trade operations
PARKS through Automatic and duties and tariffs
Route similar to
SEZ units) in Export • No cap on Foreign investment
• 100 percent foreign Oriented Units for manufacturing items
reserved for SSI as well as
investment under (“EOUs”) even if it is exemption from industrial
automatic route is manufacturing an licensing
allowed in item reserved for
electronics and the small scale • An SEZ unit can be set up to
software industries sector undertake trading activities in
addition to manufacturing of
set up exclusively goods and rendering of
for exports. services
 The recent Government in INDIA has now raised the
FDI cap for DEFENCE sector From 26% to 49%.
 Also, some railway operations and projects were
allowed to receive up to 100 per cent FDI.
 The decisions came barely two weeks after the
Cabinet approved a similar proposal to set the
composite foreign investment cap for private insurance
firms at 49 per cent, provided ‘control’ remained with
Indians.
 MODI Government also to approve(Not yet approved)
100% FDI CAP for Real Estate Sector.
LIST OF SECTORS UNDER AUTOMATIC ROUTE FOR FDI UPTO 100%
Most manufacturing activities
Drugs and pharmaceuticals
Food Processing
Electronic Hardware
Software Development
Film Industry
Advertizing
Hospitals
Pollution control and management
Management Consultancy
Computer related services
Research and development services
Health related and social services
Pollution control and management services
Travel Related Services
COMPARISON OF PREVIOUS POLICY AND 2014 REVISEED POLICY